How To Borrow Money from Social Security

27 Apr How To Borrow Money from Social Security

Wondering about how you can borrow money from social security? Some individuals have identified a loophole in the system which they have capitalized on in order to get loans with free interest. This can be possible when one starts receiving his or her benefits from the social security but then decide to payback everything so as to start afresh at a later date.

Decision making to get benefits

Many people often find it challenging to make decisions about when they can start getting their benefits upon reaching retirement age. While some people may opt to get their benefits at an early age in their lives, the challenge they face is that the benefits will be reduced compared to those who are entitled to full packages upon reaching full retirement age. What usually happens is that some people have a tendency of reversing their decisions after claiming their benefits at an early age. They can decide to pay back what they have received over a certain period so that they can be eligible to start all over again. This implies that the individuals can just pay a nominal amount of the money that has been received in the form of benefits and they retain the interest. This is more or less the same as getting an interest free loan

Advantages of rescinding decision to receive benefits

The strategy of obtaining a free loan by individuals from the social security has got its advantages which include the following:

The individuals have the opportunity to use early benefits from the social security as an interest free loan where they are only entitled to pay back the principal amount owed while retaining the interest.

This strategy has been found to be beneficial to individuals that have high income levels since they can be in a position to invest their benefits while they continue to enjoy good health from other means of financial sources.

Apart from these seemingly advantages to individuals who decide to reverse their decisions to get benefits and instead convert them into interest free loans from http://finance.yahoo.com, it has been observed that this strategy has its own costs to the system. It is believed that the strategy can cost the Social Security between $6 billion and $11 billion annually as more people would tend to use the loophole to claim free loans. This does not benefit the system as a whole but it actually puts a strain on it as many people are likely to abuse it for their personal benefit. Initially, the Social Security was not designed to offer free loans to people but specific benefits that are deserved as they reach retirement age.

Measures that have been taken to address the anomalies

However, it should be noted that the Social Security Administration has put a raft of policy changes for retirement planning in place that are specifically meant to curb the abuse of this loophole within the social security system. The measures that have been implemented by the administration represent a short term loan which differs from the long term range benefits that could be obtained by individuals using the free interest loan gap by reversing their decisions to get benefits from the Social Security.